Conference Transcript - BDSX 2026-06-03

Operator

Andrew Brackman, Chief Financial Officer, Chief Financial Officer, Chief Commercial Officer, Aaron Kane, and VP of Marketing, Robby Lunt. They're going to go through a slide for a few minutes. Thank you, Andrew, and thank you, William Blair team. It's an honor and privilege to be here today. As Andrew referenced, you've got the leadership team here, and we'll have the breakout for this session in Burnham B. So with that, I am required, one last thing, I am required to tell you that for a full list of research disclosures, please visit williamblair.com.

Speaker 4

And I'll turn it over to the biotech team. Thank you, Andrew. And thank you, William Blair team. It's an honor and privilege to be here today. As Andrew referenced, you've got the leadership team here and members of the leadership team. we really are commercial stage focused on execution so we thought it'd be a great opportunity for everybody to hear directly from our chief commercial officer and head of marketing for us we had an exceptionally strong first quarter continuing a track record of great performance you can see we delivered greater than 40% revenue growth we continue to have industry leading gross margins greater than 80% the 82% we have guided that will stay in that low to mid 80 range and we continue to make significant progress on our march towards profitability which we will achieve this fiscal year you've got four members of the team here but we're really proud of what we've achieved in building a culture in a team you can see that we recently received our third consecutive top workplace award which we take great pride in but most importantly as can see the revenue numbers we've guided 108 to 114 million this year but most importantly that represents a significant number of patients and we continue to address an unmet need and have a great opportunity to possibly impact care in the lung cancer space so with that i'm going to turn it over to karen okane to dive into some of the commercial performance thank you scott

Kieran O'Kane, Analyst — CCO

But, so yeah, really starting off with our growth strategy for this year and coming years, we have the most established commercial team at our core point, which for lung diseases, it's the pulmonologist. So we've been really building and investing in our infrastructure over the last five, six years plus. And we believe that has, one, established us really as the leader within our space, established a moat for our business, but also now really is a catalyst for growth as we move forward through this year and beyond. Really our focus this year is execution, so executing on the opportunity that we have in front of us today with the tests that we have in the bag, but as we move through this year and look at what's beyond, really you know having invested in the infrastructure in the sales team having become market leaders and experts in our field we're in a pole position to leverage that with additional products whether that's organic through our own pipeline or potentially even inorganic through collaborations partnerships or you know dropping new products into the bag as we move through to next year and beyond with that I think I'm going to hand over to Robbie Lunt who's going to talk about really the challenges that we're addressing today with diseases of the lung and some of our current product markets sorry product

Robby Lunt, Other

offerings that we have in the back today. Thank you Karen. Lung diseases present some unique challenges in that most patients are asymptomatic until their lung disease progresses and when that lung disease does progress they show up with symptoms like chronic cough or shortness of breath that are really common and don't allow appropriate diagnosis and ultimately treatment so going forward we know that diagnostic tests will play a key role in differentiating between those two diseases and supporting early detection of distinct diseases that will ultimately improve patient outcomes while our commercial focus today is on lung cancer we know that we have the scientific clinical and commercial expertise that will be able to take advantage of diagnostic opportunities well beyond lung cancer and address some of these other unmet needs across lung diseases within the lung cancer space our focus today is on lung nodule risk stratification where there's five to six million patients each year that present with newly detected lung nodules and the big unmet need there is identifying the about 5% of those patients that will develop or have lung cancer in a way that prevents delayed diagnoses and avoids any unnecessary procedures on patients that don't ultimately have lung cancer. And how that presents in the clinical setting is through this patient journey where there are multiple steps from the initial nodule discovery to the ultimate surgical or other treatment modalities used for those patients that are ultimately diagnosed with lung cancer. So the real goal of lung nodule management is to diagnose those lung cancers as fast as possible, yet we know in the current landscape, standard of care can lead to multiple different points of delays that negatively impacts patient outcomes. Recent studies have shown that up to 43% of patients upstage between their nodule discovery and referral and movement through this pathway to that surgery or treatment. and we also know that patients that are diagnosed at a later stage have much worse survival. So effective nodule management and accelerating the right patients through this landscape can ultimately lead to earlier stage of diagnosis and improved survival for that subset of patients that do have malignant lung nodules. To talk a little bit more about our Notify Lung portfolio,

Kieran O'Kane, Analyst — CCO

I'm going to hand it back to Kieran. Thank you Robbie. So we actually have five on-market tests that span the point of diagnosis of lung cancer. Our three proprietary tests have ADLT status and really the best way of thinking about that is it gives us a lot more control and protection on pricing. Really today I'm going to focus on the left side of this slide though with Notify Lung, that is our primary growth driver as an organization, and the goal here is really to manage that large number of patients that Robbie referred to, five to six million patients a year with an identified lung nodule, and make sure that those patients who are high risk are appropriately managed and funneled, really triaged into the specialty point of care, being the pulmonologist, and those who are lower risk can be effectively managed out in the community, whether that's community pulmonology or primary care. What we know today is that about 50% of patients are managed in primary care, 50% are managed at that specialty level. So what we're trying to do is differentiate, and you can see on the slide that they're highlighted by the orange figureheads, really the patients who are high risk, as I say, funneling them through, not allowing them to stay out in the community or out in primary care, making sure that they're uh channel through to the specialty point of care where they're given appropriate treatment you know when we are looking at and i'll come on and talk about the evolution of our sales strategy um but when we first looked at you know the 50 of patients who were managed in primary care um what we what we under appreciated i think at launch was that uh you know that the number of primary care physicians out there north of 250,000 you know we challenged whether that was an addressable market for us I think as time evolved and we understood more of the market through claims data what we realized is actually those patients with nodules are concentrated in a very addressable number of primary care physicians so you can see on the slide about 15,000 primary care physicians manage about 80 percent of pulmonary nodules so that became a much more addressable market for us and something similar to the specialty call point in the universe of pulmonologists that are out there really the goal here as you can see in this slide is let's let's funnel through and concentrate those high-risk individuals at the specialty call point keep lower risk individuals out in primary care out in the community where they can be safely monitored under a watchful weighting protocol with serial CT scans and imaging. So looking at the evolution of our sales strategy over time, really at launch back in 2020, our goal was to develop advocates. So we called on the thought leaders in the space, pulmonologists with a specialty interest and knowledge in diagnosing lung cancer. The goal there was to develop confidence within that call point, within that community and ultimately develop advocacy so that they would endorse the use of notify upstream of themselves. So those those KOLs largely the proceduralists they're interested in doing bronchoscopies that's the diagnostic procedure for lung cancer they want to see the highest risk patients right they want to spend less time in the clinic assessing patients for risk more time in the Bronx suite, doing procedures, diagnostic procedures, and ultimately finding those lung cancers. So our goal then moved on from developing advocacy. Within that call point, once that was done, we leveraged and mobilized those thought leaders to educate their referral base. Initially, that was pulmonologists, so the rest of the pulmonology community, to use Notify, help triage patients by risk, and then, you know, refer in the highest risk individuals. What we then found as kind of volumes grew and really the advocates and the thought leaders became more and more confident with Notify is that their referral base isn't just in community pulmonology, it's also in primary care as well. They pulled us into that environment within their referral network, so educating primary care physicians as well as pulmonologists in the use of notified testing, again, to help triage patients by risk and funnel those highest risk individuals into the specialty call point. Through claims data and other analyses, as I say, we really narrowed that call point down to about 15,000 individuals in primary care who manage 80 percent of nodules very addressable for us and very manageable in terms of an educational goal for for using notify testing so looking at the sales structure today we split the country into 50 sales territories the anchor sales position within each of those territories is the pulmonology sales consultant and as we layer in additional resources we really look at what the business opportunity and business need is within each of those territories and decide to layer in an account manager where business is maturing. So that associate sales consultant, really the job is to go in farm tests, manage accounts with existing business, potentially grow business in existing accounts, but that frees up the pulmonology sales consultant to go win new business. As we've transitioned into primary care, we've laid in a specialty role there. So the general practice sales consultant, as we as we call them focused on primary care really they are layered in where we have that advocate in place that interest that in pushing diagnostic testing out into the community into primary care we leverage that advocate work very closely with them to educate primary care on appropriate use of notified testing and really drive tests out into the community from from that standpoint so that has been a tremendous success i would say you know going into primary care that's a core point that is very familiar with diagnostic testing they run diagnostic tests every day they have capability for blood draws in-house typically so really it was primed for that educational need and it's it's really just a case of educating them on one what notify is as a test but really what to do with the with the results who to keep hold of what that looks like and then who to refer into the to the specialty call point. So talking more about that I'm going to hand back to Robbie who's going to talk about each of the individual notified tests and really how they're applied for nodules of different sizes. So between the territory-based sales

Robby Lunt, Other

structure and our product attributes we're uniquely positioned to penetrate this entire market opportunity and historically one of the ways that clinicians looked at this patient population was based on nodule size. Even the pulmonary guidelines separate out this patient population based on nodule size. And our products have been designed to address the unique clinical needs and identify lung cancer earlier within each of these patient populations. So on the right side here with the larger size lung nodules, guidelines suggest more of a dealer's choice based on clinical judgment of what's the appropriate next steps and our tests are designed there to prioritize and triage patients so that the limited specialty resources can focus on the highest risk patient population and avoid those delayed diagnoses that we talked about earlier on the left side here in these smaller nodules conventionally these are patients that may not receive any follow-up at all but really the default would be to do some sort of mid to long term follow-up there and see if anything changes if the nodule grows or becomes more suspicious for lung cancer. With our tests deployed in this patient population we're enabling this needle in a haystack of finding those very few patients in the small nodule population that should be looked at closer that should be referred to a specialist faster and not miss that window for early detection of lung cancer and improved patient outcomes. So we've seen some great anecdotes in our early experience in primary care really across both of these patient populations but some of the excitement is coming in the small nodules where historically there wasn't much that clinicians could do except for wait and see and now with our tests they're able to be more aggressive and find more of those opportunities for early detection of lung cancer. One of the tools that we created early after launch was data visualization tool for us to be able to monitor in a commercial setting does test performance match what we saw in early clinical studies but also to drive adoption and demonstrate utility within individual practices. So here are two different ways that we can visualize the data in both on the left side are patients and their risk of having lung cancer prior to notified testing and then next to it is their risk after receiving notified testing and what you can see is that many patients were really in the middle of that risk profile and conventional tools are limited in that many patients do fall into that middle ground where there's not clear next steps but after conducting notify testing you can see that patients are really pushed up or down into more clear clinical next steps whether that be aggressive with intervention or continue to monitor with ct surveillance but really providing a lot more clarity at a large scale across an entire patient population so this tool was so effective in our early conversations with physicians that we've looked at other ways that we can use that to demonstrate clinical utility and most recently have added the ability to show clinical decision change so physicians what were what they were going to do prior to notify testing and then how notified testing actually informed a change in decision or change in treatment plan for that patient. This has presented a lot of new opportunities for publications and generating evidence on clinical utility from our commercially tested patient population. Speaking of evidence, we've been publishing for over 10 years on these two tests now, really working through the evolution of clinical data to support clinical impaired adoption most recently just a few months ago we published the largest clinical validation study for a lung nodule biomarker ever published in future oncology and have many more opportunities going forward to continue to add to our extensive evidence base one of the studies I wanted to highlight today is called clarify and clarify also leverages the broad adoption we've seen in the commercial setting by doing a retrospective chart review of patients that were tested by physicians in the real world. And our ultimate goal for Clarify is 3,000 to 4,000 patients. And because of the study design, it's highly efficient and we're approaching almost 2,000 patients enrolled in under 24 months in that study. The data from that study actually informed the 2026 publication that that large clinical validation with over 1,100 patients in it was bolstered by an interim analysis of the Clarify study. And we're not stopping there. We have other planned interim analyses for the Clarify study that will allow us to look at new pieces of information like time to diagnosis. If we can demonstrate faster time to diagnosis, then we know we're having a positive impact on patient care and lung nodule management as a whole. One of the conventional risk classification tools is PET imaging. And so we're also going to look at, through this clarify study, the performance of notified tests in combination or in sequence with PET imaging. So a lot of exciting opportunities for us to continue to advance this evidence package and continue to establish ourselves in market leaders for lung nodule risk classification. And really the goal here is to continue to drive

Kieran O'Kane, Analyst — CCO

market penetration. If you look at, back to the original slides and the numbers, we mentioned that there were five to six million nodules found annually in the U.S. So it's important to point out that about 90 percent of those are actually found incidentally. That means, you know, a patient turns up at the emergency room having broken a rib, broken a collarbone, something that causes an image CT x-ray to be taken of their chest and that incidentally they find a pulmonary nodule in there. Now there's a lot of talk and noise around screening efforts in lung cancer and unfortunately just with Loto CT screening it hasn't been a huge amount of success since those guidelines came into place over a decade ago now. So about 10% of nodules are found through screening. Overall screening penetration is now probably in the mid-teens. About 15% of patients who are eligible for low-dose CT screening actually get screened. There's a lot of noise and a lot of talk around upstream of those low-dose CT imaging blood tests that are coming into play looking at either detecting single cancer early detection so dedicated at looking for lung cancer or multi-cancer early detection really where you're using a blood test to identify individuals who a high risk of cancer really anywhere in the body. The goal of those tests is to funnel them into in this case load OCT for for detecting lung cancer. What we're looking at there and we're strong advocates of those tests being successful because they will increase the addressable market. If you think of that paradigm shift going from 10% of screen detected nodules or of nodules being screen detected, really the more patients that we find that get channeled into screening modalities like low dose CT, that's only gonna increase, right? So the addressable market is increasing and already we have a ton of runway, even with the number of nodules that are detected today to drive growth. So tremendous amount of opportunity, that's only going to increase with the adoption and the improvements in blood-based tests that are driving patients in for screening and then there's uh also uh new tests coming out really ai layers that go on top of ct scans that are going to enhance the ability of a radiologist or a pulmonologist to detect nodules uh within that ct scan itself and so both of those will continue to develop and grow the market opportunity for notified testing uh in in the coming uh year and beyond all right so with that i think i'm going to hand on to robin who's going to talk

Robin Harper Cowie, CFO

through some of our financials thanks kieran um as scott mentioned at the beginning we had a another fantastic quarter with our revenue growing 42 year over year i'll talk a little bit more about the drivers of that here in a moment but primarily driven by the great work being done by kieran and robbie and their teams in reaching more physicians and more patients every single quarter we have really a handful of goals we're very much focused on driving our top line revenue growth but also getting to cash flow positivity and so the best way to do that is to be very effective and efficient and we're extraordinarily pleased to be able to share our 82 gross margin for the quarter which is now several quarters in a row of greater than 80 percent which is market leading in diagnostics that gross margin improvement year over year 300 basis point improvement was driven not only by improvements in our reimbursement and our average revenue per test but also improvements in our operations we continue to strive to become more efficient and effective in the lab and in the rest of our operations and we were able to decrease increase our average price per test paid. We also made substantial improvements on our path to profitability. We saw 35% improvement in adjusted EBITDA and improvements in our net loss in the quarter. We are anticipating and projecting that we will hit cash flow positivity by the end of the year. as i mentioned our revenue is being driven by multiple factors so not just the improvement in volume so we saw 29 growth in test volumes but we are also seeing strong improvement in average revenue per test and that is being driven by increasing numbers of private payers covering our tests and improvements in our operations and our revenue cycle management we saw a large increase in average revenue per test in the third quarter of last year based off of a variety of projects and initiatives in the organization and that asp improvement has continued and proven to be durable over the last several quarters resulting in 37 percent growth in lung diagnostic revenue for the quarter finally moving to our guidance as scott mentioned we beat and raised so it raised our uh full year revenue target to 108 to 114 million for the year which represents 25 year over year growth we also reiterated that our gross margins would remain at or above that 80 best in class mark and then also continue to talk about getting to cash flow positivity by the end of the year. So since being effective and efficient is one of our key priorities for the organization, we can give you five minutes back.

Kieran O'Kane, Analyst — CCO

Thank you.